First published on Thursday, June 4, 2020
Last updated on Thursday, December 12, 2024
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Annual leave is an important entitlement for your Australian employees. It gives them well-earned time off to relax, recharge, and manage their personal affairs. This time is essential for employee wellbeing and long-term productivity, helping to reduce burnout while managing stress levels.
Taking regular annual leave and making use of this employee entitlement helps your staff members maintain their mental and physical health, while improving their job satisfaction and motivation at work.
Businesses can, however, face challenges when it comes to effectively providing and managing annual leave. Whether it’s figuring out your employee’s yearly annual leave entitlement, annual leave accrual, or striking the perfect balance to make sure your business can remain productive while employees take their annual leave.
Having an effective staff holiday planner can help but there are many factors’ you need to keep in mind. Let’s dive into the biggest questions when it comes to annual leave and how to manage them.
The legal framework of annual leave
Annual leave is included in the National Employment Standards (NES). These set the minimum standards that are applicable to all employees in the national workplace relations system.
Any award, employment contract, enterprise agreement or registered agreement your employees fall under can’t provide for conditions that are less than the NES or disregard the NES entirely.
It covers:
Minimum entitlements to annual leave
How and when annual leave can be taken
The pay rate employees on annual leave are entitled to
Who is entitled to annual leave?
Annual leave entitlement applies to both full-time employees and part-time employees in Australia. But that doesn’t mean their entitlement is the same.
Full-time employees
Employees who work full-time are entitled to annual leave depending on their applicable employment benefits. The standard amount of leave in Australia—as outlined in the National Employment Standards (NES)—is four weeks for every 12 months worked.
Leave is accrued from an employee’s first official day on the job, and they are entitled to take that leave as soon as the balance has been accumulated.
Part-time employees
Employees who work part-time can accrue up to four weeks of annual leave for every 12 months they work, just like full-time employees.
Unlike full-time employees, however, the number of leave hours they accrue correlates with the hours worked. For example, if a full-time employee works 40 hours a week and a part-time employee works 20 hours a week, the part-time employee will receive half the amount of annual leave days as the full-time employee.
Casual employees
While they don’t usually receive a yearly annual leave entitlement, casual employees generally get paid a higher hourly rate to compensate for the lack of entitlements and benefits. This rate is called casual loading.
How is annual leave accrued and calculated?
An employee begins accumulating their annual leave from their first day of employment at your company. This means that even employees on probation accumulate annual leave hours.
Annual leave continues to be accrued while an employee is:
On paid leave: annual leave, sick and carer’s leave, family and domestic violence leave
On community service leave: including jury duty
On long service leave
Importantly, any employee on the Government’s Paid Parental Leave Scheme isn’t considered to be on paid leave, which means they don’t accumulate annual leave during this period if they are taking unpaid leave from work.
Annual leave is also not accrued when an employee takes:
Unpaid annual leave
Unpaid sick or carer’s leave
Unpaid parental leave
Or during a annual leave cash out period.
An employee’s leave balance adds up over the course of the year, and if they don’t take their full entitlement before the end of the year, the balance rolls over to the next year.
What do employees need to be paid while on annual leave?
During their annual leave, employees are generally paid their base rate of pay for the ordinary hours they would have worked. So, they receive the same amount of pay that they would receive if they were at work during this period.
If the employee is entitled to additional payments including bonuses and loading during the period they are on annual leave, then these entitlements should be paid into their annual leave pay.
Some Australian employees may also be eligible for annual leave loading, which is an additional payment they receive while on annual leave. This is aimed at compensating for an employee being unable to accumulate overtime pay during their annual leave period.
When can annual leave be taken?
When annual leave can be taken depends on the employer and the industry in which the business operates.
It’s crucial for employers to balance the needs of the business alongside their employees’ needs, rights, and wellbeing.
A few key considerations to keep in mind are:
Business continuity
One of an employer’s primary responsibilities is to ensure that the business can remain functional and operations can continue even while employees are on leave.
This can be especially challenging for small businesses that often have limited resources and teams. If multiple employees who perform similar roles in your company request leave at the same time, you may be forced to stagger their leave periods in order to keep your business running smoothly.
Public holidays
If a public holiday falls during a period of annual leave for an employee, that public holiday is not taken out of their accrued leave balance.
Refusing annual leave
On paper, employers are able to refuse annual leave requests if they are unreasonable or if approving the request will harm the business.
However, these refusals need to be grounded in sound reasoning and backed by data. They also need to be fair to the employee. Ideally, these refusals should be paired with the negotiation of an alternative leave period that suits both parties. Having a annual leave refusal letter to inform your employee that their leave request has been refused can help.
Effective methods to manage annual leave
Annual leave management shouldn’t add to your HR admin hours, but it often does. Especially if a business owner or employer is handling annual leave manually.
Luckily, there are simple steps an employer can take to make the process easier for them and their employees.
Clarify the annual leave process through policies
If employees are aware of what’s expected of them from their very first day at work, it’s easier for them to succeed.
This also applies to leave management processes. Maintain an annual leave policy that outlines the notice period employees should provide when possible, the process the employer will follow to approve annual leave, and the considerations that would apply to this decision. Include what may lead to an annual leave request being declined and the periods that may be busier than usual for your business.
Maintain a central calendar
Visibility and transparency are key to ensuring that communication in your business is smooth and your employees can keep up morale and productivity.
A central calendar can help you flag leave clashes and stay fully staffed. This also helps your employees see who’s on leave and gain a better understanding of the ideal time to book their own annual leave.
Put your employees in the driving seat
In the same vein of maintaining visibility and transparency, giving your employees access to their accrued leave balance can help them take charge of their calendar and plan accordingly.
This prevents awkward conversations like informing an employee that they have an insufficient leave balance.
How BrightHR helps you manage annual leave
BrightHR is an end-to-end suite of features, software, and services to help businesses streamline their processes.
Our software includes an easy-to-use holiday planner with automatic annual leave accrual and immediate flagging of holiday clashes.
Plus it helps you:
Maintain a single, transparent view of your team’s schedule
Reduce your HR admin hours and manual paperwork
Keep digital records that are easy to reference
Approve or deny annual leave requests on the go
See it in action with a free software tour from our team of expert consultants.
